Shell angers the City with 'inadequate' statement

Shell is facing an onslaught of criticism from City analysts accusing the oil giant of giving the market "inconsistencies", "vagueness" and "contradictions".

The outcry centres on a presentation to analysts concerning the outlook for the Anglo-Dutch group's Exploration and Production division. The headline news was that the company was downgrading its annual growth target from 5 to 3 per cent, but as Commerzbank's Steve Turner noted: "Marked reluctance to give specific detail was evident."

Lehman Brothers' Jeremy Elden also said the reasons for the downgrade were "inadequately explained" and went on to write: "Our initial analysis suggests there has been a greater decline in existing production base than Shell is prepared to acknowledge."

Commerzbank analysts identified the same problem: "Management is now talking about production from growth projects of 1.2 million barrels/day, compared with only 1.0m b/d last December, while at the same time it is downgrading its production target. This inconsistency is yet to be explained."

A major area analysts felt had been glossed over was the delay to projects around the world. "It barely acknowledged it had a project in Iran, and only mentioned Nigeria, Angola, Oman and China in general terms," said Mr Elden.

Other houses have added their criticisms. One senior analyst commented: "This is the sort of presentation you would get from the management of a penny stock, not Shell. It had very, very little substance."

The general conclusion by both Commerzbank and Lehman was that the presentation's vagueness and inadequacy had tarnished its long-standing reputation for conservative projections and management credibility.

"The very big change ... calls into question the quality of data in Shell's planning process and casts something of a shadow on what to expect in the future," said Mr Elden.

A Shell spokesperson said the company believed it had provided enough detail on the main issues, and had given out as much information as it could in areas where analysts were dissatisfied.